Investing scared and predicting the future

Recently in this column, I discussed the main problem of investing in most markets, and especially stock markets — they’re a bit bouncy.

Then I went through my apologetic spiel telling you how this really isn’t a problem for investments for longer time-horizon goals. Nevertheless, whenever I give a talk about how stocks, investments, investing, the markets, or the economy work, I’ll inevitably get this statement from someone in the audience:

“Things are different now. What was true in the past isn’t true anymore.”

Now, I’m not a prophet or a seer, but I believe that what I’ve learned and studied is still applicable. Not believing that takes away everything that I use to manage money effectively. Therefore, if you do believe that things are completely different now, then all of the lessons from the past 100-plus years (and dozens of these columns) concerning investing are for naught.

There is also no single person you should listen to, no sole book you should read, no one periodical you should subscribe to. They are all either basing their pronouncements on a past that you say doesn’t matter anymore or a future that no one can be sure of.

So, no. I don’t think things are different now.

Let me restate that a bit. Things are always different. I believe it was Mark Twain who said, “History never repeats itself, it rhymes”.

So, while things are different now, they are not too different from what has come before and therefore are quite manageable. Humans, it seems, do not change that dramatically over the years; and it is those darn humans that drive the markets.

“But it’s obvious that we are about to hit a prolonged decline. It’s all over the T.V., radio, and the Internet. Shouldn’t we do something about it? We can always get back into the market later when things settle out.”

It is obvious that we are about to hit a prolonged decline. It is also obvious that we have established a base and will continue with a prolonged bull market. It is also obvious that the economy of the world is in the process of reestablishing its equilibrium and we’ll be zigzagging for a while.

All of these are obvious (no matter when you are reading this) because a great many learned finance folks are declaring it so. No matter what you think is going to happen, there is a slew of experts who agree with you. This is not all that unusual. They are all trying to predict the future.

Something else that is not all that unusual: Those who predict the greatest doom get the biggest headlines. That doesn’t mean they are wrong, but it doesn’t mean they are right either. Me? I’ve always been partial to zigzags, but I won’t base my investing on that being the only possible future.

Now that I’ve shown that the world, as different as it seems, is still pretty much the same place as it’s always been, next week I’ll look at what is different now.

Gary Silverman, CFP® is the founder of Personal Money Planning, LLC, a Wichita Falls retirement planning and investment management firm and author of Real World Investing (available at amazon.com). Contact him at www.PersonalMoneyPlanning.com.